"should be real careful about making promises that won’t come due for 30 years"

Robert Stout, interim finance director for Los Altos Hills, Calif. Vallejo, Calif., became the largest city to declare for bankruptcy when it filed in 2008. Stout, who served as the citys finance director at the time, said revenues had plunged and citizens opposed any tax increases to maintain services. He faced a challenge in trimming payroll expenses, with minimum staffing levels set in contracts with both the citys police and fire departments. Once officials showed employees how dire the situation was, many of them left. It was payments for these employees unused sick and vacation time that eventually led the city to declare for bankruptcy, Stout said. Vallejo has since emerged from bankruptcy, but not before making deep cuts to staffing and city services. To avoid a similar fate, Stout said municipalities must better understand their long-term costs and risks. We s...